TRANSNET CORPORATION (NASDAQ:TRNT)
INVESTMENT ANALYSIS SUMMARY
TransNet Corporation, which The Napeague Letter has followed for almost a
year, recently announced extremely strong results for the second quarter
of fiscal 1997. This continued its long-term growth trend as you can see
from the following chart:
2nd Quarter 1st Quarter ------- Fiscal Year ------
1997 1996 1997 1996 1996 1995 1994 1993
------ ------ ------ ------ ------ ------ ------ ------
Revenues 19,232 17,454 16,539 15,730 64,201 56,217 40,342 28,903
Gross Profit 2,014 1,872 1,842 1,717 7,226 6,454 5,396 4,676
Pre-Tax Income 316 290 297 236 966 692 394 263
Net Income 316 290 297 236 1,003 882 394 263
Net Income/Sh 0.07 0.06 0.06 0.05 0.19 0.17 0.08 0.05
- The Company's high-margin Service & Support business led this
expansion with 40% growth versus prior year, thus demonstrating
that TransNet's key growth strategy is working successfully.
- These results give TRNT trailing 12 month earnings per share of
$.22. At a market price of $2.25, the Company trades at a PE
multiple of only 10.2, and at $3.00 it trades at a multiple of
13.6, substantially below that of its industry segment or the
market in total.
- The results for the quarter exceeded my expectations. On January
10th I projected revenues of $19,232,000, net income of $316,000,
and earnings per share of $.06 - all of which were exceeded.
- I am currently projecting a 42% increase in earnings per share for
fiscal 1997, on a 22% increase in revenue.
TransNet Corporation (NASDAQ:TRNT) provides its corporate clients in the
Northeast, with a variety of Systems Outsourcing services under extended
contracts, and hardware and software at preferential pricing. As a result,
the Company has a strong following of loyal clients, a reputation for
innovation and quality as a value-added microcomputer reseller, and
a history of increasing profitability.
- Several different industry studies confirm that demand for Systems
Outsourcing , which has been strong for several years, will grow
even more rapidly in the future.
TransNet has announced that it will implement "alternative cost-effective
methods of distributing personal computers and printers to our clients."
I estimate that such a program might generate an additional $.07 per
share.
TransNet is a potential acquisition candidate in a market segment which
is rapidly consolidating through acquisition, and there are some
indications that the Company may be taking steps to prepare itself to be
acquired.
At its closing price of $2.38 on Friday, January 31st, the Company is
substantially undervalued, and can justify a market price in excess of
$6.00 per share.
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